Tuesday 27 January 2015
Polish Capacity Market
Poland, following example of other states, took measures enabling further evaluation of implementation of the capacity market into Polish power market.
What is capacity market?
Capacity market, which is already present in few countries such as the UK, Spain or the USA, has a role of securing future market supply – how come ?
In the well-functioning, price-driven electricity market, “electricity is like any other commodity, is bought wholesale and resold to consumers at retail prices” (The Energy Collective). Keeping in mind the structure of many electricity markets, in which renewable energy sources contribute massively to the energy mix, future stability of the electricity supply can be at risk, as RES have disadvantage of not being programmable. Furthermore, with subsidizing and favorable investment conditions, construction of new traditional power plants does not seem to be a clever choice.
Some countries decided to introduce the system called “capacity market” that shall encourage more investments in programmable power plants. Interested investor (or already existing power plant that need to undertake modernization in order to fulfill technical requirements) receives compensation for capacity offered in the future. For example, in Italian draft of capacity market regulation, auction for the capacity would take place for 3-years period with additional balancing auctions each year.
Proposal of Capacity Market in Poland
First steps towards capacity market development have been taken on the conference organized by the Ministry of Economy on October 29,2014 gathering representatives of regulatory authorities as well as the industry.
One of the most important phases of the planning of capacity market is detailed and strategic evaluation of the Polish electricity market and its possible ways of evaluation. President of the Energy Regulatory Office, Maciej Bando, has collected information about the investment plans of electricity producers in the long future, translating into time slot 2014-2028. The evaluation is prepared on the basis of estimates of energy companies regarding the production of electricity, plans for modernization and expansion of power. The plans relate to the producers with capacity over 50 MW of non-renewable energy sources based.
The report, stating higher probability of centralised market design, suggests that production units, as it takes places in the UK, will apply for compensation via auctions. Auctions are to be held for four years before the year of delivery, meaning that if the plant would like to operate within the power market in 2020 (and be compensated for that year), the auction must take place as early as 2016. At the auction, production unit can win an annual contract, but there would be an opportunity to extend the contract for subsequent years under the same conditions. The contract extension could be the equal to the maximum of: new units - 10 years, modernized - 6 years, other existing - 3 years.
Why is capacity market important?
Capacity market is very important, as it is a system that provides security of electricity supply. Even extensive investment in the maintenance of security of supply is much cheaper than eventual costs of lack of supply or its interruption. Furthermore, such system gives signal for the investors of feasible signals for further investments in the programmable, stable energy sources such as gas, CCGT or oil power plants.
Based on:http://www.ure.gov.pl/pl/urzad/informacje-ogolne/aktualnosci/5888,Rynek-Mocy-Rozwiazanie-dla-Polski-konferencja-w-Ministerstwie-Gospodarki-z-udzia.htmlhttp://theenergycollective.com/adamjames/237496/energy-nerd-lunch-break-how-capacity-market-works-and-why-it-mattershttp://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252Fstanislawporeba_6.pdfhttp://wysokienapiecie.pl/atom/527-znamy-szczegoly-pomyslu-na-rynek-mocyPicture:
What is capacity market?
Capacity market, which is already present in few countries such as the UK, Spain or the USA, has a role of securing future market supply – how come ?
In the well-functioning, price-driven electricity market, “electricity is like any other commodity, is bought wholesale and resold to consumers at retail prices” (The Energy Collective). Keeping in mind the structure of many electricity markets, in which renewable energy sources contribute massively to the energy mix, future stability of the electricity supply can be at risk, as RES have disadvantage of not being programmable. Furthermore, with subsidizing and favorable investment conditions, construction of new traditional power plants does not seem to be a clever choice.
Some countries decided to introduce the system called “capacity market” that shall encourage more investments in programmable power plants. Interested investor (or already existing power plant that need to undertake modernization in order to fulfill technical requirements) receives compensation for capacity offered in the future. For example, in Italian draft of capacity market regulation, auction for the capacity would take place for 3-years period with additional balancing auctions each year.
Proposal of Capacity Market in Poland
First steps towards capacity market development have been taken on the conference organized by the Ministry of Economy on October 29,2014 gathering representatives of regulatory authorities as well as the industry.
One of the most important phases of the planning of capacity market is detailed and strategic evaluation of the Polish electricity market and its possible ways of evaluation. President of the Energy Regulatory Office, Maciej Bando, has collected information about the investment plans of electricity producers in the long future, translating into time slot 2014-2028. The evaluation is prepared on the basis of estimates of energy companies regarding the production of electricity, plans for modernization and expansion of power. The plans relate to the producers with capacity over 50 MW of non-renewable energy sources based.
- centralized market with balancing contracts or
- decentralized market with balancing contracts.
The report, stating higher probability of centralised market design, suggests that production units, as it takes places in the UK, will apply for compensation via auctions. Auctions are to be held for four years before the year of delivery, meaning that if the plant would like to operate within the power market in 2020 (and be compensated for that year), the auction must take place as early as 2016. At the auction, production unit can win an annual contract, but there would be an opportunity to extend the contract for subsequent years under the same conditions. The contract extension could be the equal to the maximum of: new units - 10 years, modernized - 6 years, other existing - 3 years.
- demonstrable power capacity during specified periods and command transmission system operator,
- installed adequate communication systems to control power generating unit or a reduction in power consumption,
- installed system of measuring and billing to facilitate the settlement of energy and power in real time.
Why is capacity market important?
Capacity market is very important, as it is a system that provides security of electricity supply. Even extensive investment in the maintenance of security of supply is much cheaper than eventual costs of lack of supply or its interruption. Furthermore, such system gives signal for the investors of feasible signals for further investments in the programmable, stable energy sources such as gas, CCGT or oil power plants.
Based on:http://www.ure.gov.pl/pl/urzad/informacje-ogolne/aktualnosci/5888,Rynek-Mocy-Rozwiazanie-dla-Polski-konferencja-w-Ministerstwie-Gospodarki-z-udzia.htmlhttp://theenergycollective.com/adamjames/237496/energy-nerd-lunch-break-how-capacity-market-works-and-why-it-mattershttp://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252Fstanislawporeba_6.pdfhttp://wysokienapiecie.pl/atom/527-znamy-szczegoly-pomyslu-na-rynek-mocyPicture:
http://www.emcpl.in/images/Thermal%20Power%20Plant.jpg
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